InvestorQ : What is the principal difference between Notional turnover and premium turnover in case of futures and options contracts?
Niti Shenoi made post

What is the principal difference between Notional turnover and premium turnover in case of futures and options contracts?

Answer
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Mitali Bhutta answered.
1 year ago


Let us understand this point with a simple example. Let us say you have purchased 1 lot of Reliance March 2019 futures at Rs.1250. The lot size of Reliance is 500 shares per lot. Premium turnover is not applicable in case of future because there is no premium in case of futures and only margins have to be paid. Hence the notional turnover in case of Reliance futures will be Rs.6,25,000 (1250 X 500). When you purchase one lot of Reliance futures, then your notional turnover on one side of the trade will be Rs.6.25 lakhs and if you square up the trade on the same day then your turnover on that day will be approximately Rs.12.50 lakhs on a notional basis.

In case of options, the logic remains the same but the value of the premium also gets added to the strike price to get the notional value. For example, if you purchased 1 lot of Rs.1270 call option on Reliance at Rs.20, then the notional value of the contract will be Rs.6,45,000 {(1270+20) X 500}. However, in case of options, it is the premium turnover that is considered. In the above case, if you purchased one lot of RIL 1270 call option then your notional turnover will be Rs.6.45 lakhs but your premium turnover will only be Rs.10,000 (500*20). STT is charge don options on this premium turnover and not only the notional turnover. In case of futures, the STT is charged on the notional turnover.